Craft beer makers enjoy strong growth

Monday

Jun 25, 2007 at 12:01 AMJun 25, 2007 at 11:13 PM

Chalk up a win for David over Goliath. While sales of megabrewers' offerings are flatter than a day-old Bud, small craft breweries have become the stoutest segment of the $87 billion U.S. beer industry.

Steve Adams

Chalk up a win for David over Goliath. While sales of megabrewers' offerings are flatter than a day-old Bud, small craft breweries have become the stoutest segment of the $87 billion U.S. beer industry.

Just as consumers have developed new cravings for artisanal food, so beer drinkers are forsaking mainstream suds for hoppy India Pale Ales, German-style wheat beers and Belgian-style ales brewed here in the U.S.

"It's part of the general 'premiumization' of consumer goods in America," said Charlie Storey, vice president of marketing for Boston's Harpoon Brewery. "We have gourmet popcorn now, and ice cream and mustard, which you wouldn't have expected 20 years ago."

While craft beer shipments have grown by nearly 30 percent since 2003, overall beer shipments have grown just 2 percent, according to data compiled by Beer Marketer's Insights Inc.

The Brewers Association, a Boulder, Colo.-based industry group, defines craft beers as those brewed at small, independent breweries with only barley malts as opposed to cheaper substitutes such as rice and corn. At the end of 2006, there were nearly 1,400 craft breweries in the U.S. churning out a rapidly multiplying selection of beer styles.

"People are looking for more flavors and new and different flavors and that fits perfectly with what craft brewers are doing with seasonal releases," said Paul Gatza, director of the Brewers Association. "You're going to get new flavors on the shelf every three months."

Local craft brewers have shared in the sector's gains.

The Boston Beer Co., brewers of Samuel Adams, shipped 1.6 million barrels in 2006, a 17 percent increase over the previous year. The South Boston-based company, which is considering building a new brewery in Freetown, posted a profit of $18.2 million, up 17 percent from 2005.

Founded in 1986, Harpoon Brewery topped the 100,000-barrel mark for the first time in 2006, Storey said. The number of barrels sold rose 14 percent over 2005. Harpoon is sold at thousands of bars and package stores in 22 states east of the Mississippi River.

Although its flagship Harpoon IPA accounts for the bulk of the brewery's sales, with about 60,000 barrels shipped last year, Harpoon's fastest-growing offering is its UFO, a German-style unfiltered wheat beer.

This month it launched a new year-round product, Brown Session Ale, with six malts and hints of chocolate. At 4.3 percent alcohol by volume, it's Harpoon's lowest-alcohol beer and designed for extended drinking sessions -- hence the name.

The sales volume of seasonal brews grew 30 percent last year, and sales of variety packs, which contain severa beer styles in six- or 12-pack containers, grew 39 percent. The data, which only reflects sales in supermarkets, was compiled by researchers Information Resources Inc. of Chicago.

New Century Brewing Co. expects a big jump in demand now that grocery chain Trader Joe's has agreed to carry its Edison Light in more than 100 stores on the West Coast. Previously, the beer was only available in about 30 Trader Joe's stores in the East and Midwest.

"People are drinking something different from the mainstream," said New Century owner Rhonda Kallman, who runs the firm out of her Cohasset home. "You see the numbers from the Budweiser brand declining, and those drinkers have to be going somewhere."

Wachusett Brewing Company, which has 10 styles of beer, brewed 15,000 barrels in 2006, director of sales Peter Quinn said. The Westminster-based brewery's top seller: a blueberry wheat ale, launched four years ago.

"Certainly the market is maturing, and people are becoming more aware of craft brews in general," Quinn said.

Boston Beer, the nation's largest craft brewer, spent $12.8 million on marketing and selling expenses during 2006. But most other craft beers' gains have been accomplished without hefty marketing budgets.

Most independent brewers promote their brands through festivals and sponsorships rather than TV and print ads.

"It's very difficult for us to use conventional mass marketing techniques," Storey said. "We'd never be able to achieve the share of voice to be noticed in the marketplace."

Beer-related Web sites are providing a new avenue for online chatter about notable brews. Beeradvocate.com, a Cambridge-based Web site founded in 1996 by brothers Jason and Todd Alström, contains thousands of beer and bar reviews and event listings. This month it topped 100,000 members.

"They're very passionate about beer," Gatza, of the Brewers Association, said of the Web site. "That's a huge number that gives them incredible outreach to consumers and just a great network and an ability to communicate about what's going on."

Big beer companies such as St. Louis-based Anheuser-Busch, which controls nearly half of the U.S. beer market, aren't sitting still. Anheuser-Busch owns a 33-percent stake in Seattle's Redhook Ale Brewing Co., which has a brewery in Portsmouth, N.H.

On Feb. 1, Anheuser-Busch became the exclusive U.S. importer of InBev's European brands including Stella Artois, Beck's and Bass Pale Ale. The agreement will boost Anheuser-Busch's imports by about 1.5 million barrels annually.

This month, Anheuser-Busch entered a joint venture with Indian brewer Crown Beers Ltd. to brew and distribute its Budweiser beer on the Indian subcontinent. It also has plans to double to 200 the number of Chinese cities where Budweiser is sold. The company operates 14 breweries in China.

And it's exploring potential growth in the spirits market as well, entering a partnership with Ku Soju Inc. of Laguna Hills, Calif., to distribute a distilled spirit called Ku Soju in the U.S., according to a Brandweek report.

"They've been very active on the international stage getting U.S. rights to distribute (imports), doing more internationally and dabbling in spirits," Gatza said. "They're at least dipping their toe in the water (toward) being more than a beer company."

Contact Steve Adams at sadams@ledger.com.

WHAT IS A CRAFT BREWERY?

The Brewers Association, a Boulder, Colo-based industry group, defines craft breweries as: Those that brew with only barley malts as opposed to cheaper substitutes such as rice and corn. Those that produce fewer than two million barrels per year. Those that are independently owned, with no more than 25 percent ownership by a larger brewer or importer.

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